Daily Development for
Thursday,September 5, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

The reporter for today's case is Jim Stillman of Murphy, Weir and Butler in San Francisco.

BANKRUPTCY; BAD FAITH FILING: A Bankruptcy Court has authority to make an order in one case directing that the stay in any subsequent case will not apply (a) as to a specific creditor, (b) unless otherwise ordered by the court.

In re Felberman, 196 B.R. 678 (Bankr. S.D.N.Y. 1995).

Upon the filing of the fourth petition in a series of bankruptcies, the court was faced with "debtors acting in bad faith to interminably prolong their occupation of premises for which they cannot or will not pay and frustrate creditors in the exercise of their contractual and statutory rights." Section 349(a), allowing for the dismissal of a bankruptcy case on conditions, permitted the Bankruptcy Court in the earlier case to provide for such limited, prospective relief here. The debtor's motion to vacate the creditor's foreclosure sale was denied.

Reporter's Comment 1: A variation on the conditional dismissal is an order authorizing foreclosure in subsequent cases so long as the sale is returned for bankruptcy-supervised confirmation. See In re Burton, 195 B.R. 588 (Bankr. W.D.N.Y. 1996). In another recent case, In re Friend, 191 B.R. 391 (Bankr. W.D.Tenn. 1996), the Bankruptcy Court held that a "with prejudice" or "last opportunity" order in a previous case should be accorded "appropriate evidentiary weight" in the subsequent filing, but could not void the stay prospectively, because the stay is truly "automatic" as a matter of statute upon the filing of a petition.

Reporter's Comment 2: Why do creditors wishing to foreclose seek dismissal of the case? The better remedy is to seek relief from stay for cause; then, insist that the putative bad faith case not be dismissed, so that its pendency makes all the harder any subsequent filing.

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